Production report a bullish surprise

Lee Mielke's weekly dairy wrap-up.


For the Capital Press

Published on November 8, 2013 5:23PM

September milk production in the top 23 states totaled 14.8 billion pounds, up 1.1 percent from September 2012, according to preliminary data in USDA’s latest Milk Production report.

This is the first report to again include milk cow numbers and output per cow since the federal budget sequester. Output in the 50 states totaled 15.8 billion pounds, up 1 percent from a year ago. Revisions lowered the original August estimate to 15.7 billion pounds, up 2.5 percent from August 2012.

The July to September quarter output amounted to 49.4 billion pounds, up 1.5 percent from a year ago. The average number of milk cows during the quarter was 9.23 million head, up 16,000 from the same period last year.

September cow numbers totaled 8.51 million head, down 19,000 from August but 33,000 more than a year ago. Output per cow averaged 1,741 pounds, up 12 pounds from a year ago.

California output was up just 0.4 percent though cow numbers were up 1,000 head and output per cow was up 5 pounds. Wisconsin saw a 1 percent increase thanks to a 15-pound-per-cow gain and 1,000 more cows being milked. Idaho was down 1.5 percent on 9,000 fewer cows. New York saw a 1.8 percent gain, thanks to a 30-pound increase per cow. Pennsylvania was up 1.5 percent on a 25-pound gain per cow, though cow numbers were down 1,000 head. Minnesota was unchanged in milk output, cow numbers, and output per cow.

The biggest increase was in Florida, up 7.1 percent, followed by Kansas at 5.9 percent, and Iowa at 5.5 percent. Idaho recorded the biggest loss, followed by New Mexico, off 1.4 percent, and Missouri, off 1 percent.

Michigan was up 3.4 percent on a 30-pound gain per cow and 7,000 more cows. Texas was up 1.4 percent despite a 5-pound loss per cow but cow numbers were up 7,000 head. Washington State was up 1.6 percent on 4,000 more cows. Output per cow was unchanged from a year ago.

High Ground Dairy’s Eric Meyer says the report “delivered a rather bullish surprise,” adding that “The country’s milking herd has not yet turned sharply to the upside and challenges to profitability in certain regions of the country were still present as monthly cow numbers shrank throughout the third quarter.”

The outlook for dairy farmers is positive for Fourth Quarter into 2014, according to Meyer, “was bullish versus expectations and may continue to provide support to dairy commodity prices during the seasonal holiday rally.” He warned, however, that “We still had 1 percent growth in September and expect production to continue accelerating for the coming months and as such, we anticipate lower dairy commodity prices once holiday demand subsides towards the end of November into early December.”

September milk production was up just 1.1 percent from a year ago and that translated into small increases in cheese but lower butter and powder production, according to this week’s September Dairy Products report.

Butter production down

Butter output hit 134 million pounds, down 1.6 percent from August and 1.9 percent below September 2012. Nonfat dry milk, at 76.4 million pounds, was down a whopping 28.6 percent from August and 9.6 percent below a year ago.

American cheese totaled 347 million pounds, down 8.9 percent from August and 0.3 percent below a year ago. Italian type, at 385 million pounds, was 0.1 percent below August but a healthy 4.5 percent above a year ago. Total cheese production amounted to 892 million pounds, down 4.7 percent from August but 2.3 percent above a year ago.

Cheese prices plunged the first week of November. It started with the barrels on Wednesday and kept slipping, which pulled the blocks down Friday morning, reversing five consecutive weeks of gain. The blocks closed at $1.8225 per pound, down 8 cents on the day and the week and 9 3/4-cents below this week a year ago when they were as depressed as supporters of Mitt Romney’s bid for the presidency, down 19 cents on the week. Barrel closed Friday at $1.7825, down 8 3/4-cents on the week and 5 1/4-cents below a year ago when they plummeted 24 1/2 cents lower. Three cars of block traded hands on the week and none of barrel. The AMS-surveyed U.S. average block price hit $1.8248, up 2.7 cents, while the barrels averaged $1.8203, up 2 cents.

Cheese production schedules are often below desired levels due to tight milk supplies and competition from other Class II and IV products, according to USDA’s Dairy Market News (DMN). Good holiday orders are pushing prices higher as buyers look to secure supplies for the holiday buying season.

The Nov. 6 Daily Dairy Report points out that September cheese production was up 2.3 percent from a year ago but Cheddar production was down 1.2 percent “as cheese makers favored mozzarella.” Daily average Cheddar output in September fell to nearly two year lows, according to the DDR, and “This shift away from Cheddar is particularly significant because milk prices are based on Cheddar prices.”

Holiday demand from retailers for blocks is firm, and the decline in Cheddar production could tighten fresh supplies and sustain the spot price, the DDR said. “Given prices overseas, it is unlikely that domestic cheese supplies will be augmented by imports, as they were at this time last year.”

Cash butter continued its movement higher this week, closing the first Friday of November at $1.56, up 2 3/4-cents on the week but still 33 cents below a year ago. Twelve cars sold this week. AMS butter averaged $1.4949, down 2.9 cents.

Holiday demand has kept manufacturers busy filling retail orders. Demand for 82 percent butter remains good, according to DMN, but butter makers are focusing on finishing 80 percent domestic orders but export interest remains good.

Grade A nonfat dry milk closed Friday at a record high $1.9325, up 2 1/4-cents on the week. Extra Grade closed at a record $1.87, up 2 cents. AMS powder averaged $1.8616, up 1.6 cents, and dry whey averaged 57.96 cents, up 1.9 cents.

Global index down

This week’s GlobalDairyTrade (GDT) price index fell 1.8 percent from Oct. 15, due to drops in butter and whole milk powder. Most other prices were up. The butter price, converted to 80 percent butterfat, averaged $1.60 per pound, down 7 percent. Cheddar cheese averaged $1.99 per pound, up 1.2 percent.

High Ground Dairy’s Eric Meyer notes that “Increased milk supplies in New Zealand coming to the auction by way of whole milk powder provided additional resistance to overall dairy commodity prices,” down for the second auction in a row. Meyer views the event as slightly bearish for whole milk powder and U.S. skim milk powder, bearish for butter, but bullish for anhydrous milkfat and New Zealand skim milk powder.

Cooperatives Working Together (CWT) accepted 32 requests for export assistance this week to sell 3.344 million pounds of Cheddar and Monterey Jack cheese and 3.463 million pounds of butter to customers in Asia, Central America, Europe, the Middle East and North Africa. CWT’s 2013 cheese exports now total 114.98 million pounds plus 84.47 million pounds of butter, 44,092 pounds of anhydrous milk fat and 218,258 pounds of whole milk powder to 37 countries.

DMN reports that 4.4 billion pounds of packaged fluid milk products is estimated to have been sold in the U.S. in August, down 2.7 percent from August 2012. Estimated sales of total conventional fluid milk products decreased 3.1 percent while estimated organic fluid sales increased 4.8 percent from a year earlier.

Commercial disappearance of dairy products in the first seven months of 2013 totaled 116.4 billion pounds, up 0.2 percent from the same period in 2012. Butter was up 0.5 percent; American cheese, up 2.6 percent; other cheese, up 2.2 percent; nonfat dry milk, down 22 percent; and fluid sales were off 2.2 percent.

Looking “back to the futures,” the First Quarter 2014 pack average was at $16.99 per cwt. Nov. 1 and was hovering around $17.01 late morning Nov. 8.

CDFA releases cost report

California’s Department of Food and Agriculture (CDFA) released its annual report on dairy product manufacturing costs.

The 2012 weighted average cost to produce butter was down from a year earlier, but the costs to produce nonfat dry milk and cheese were up.

The 2012 average cost to produce cheddar cheese was 21.71 cents per pound, up from 20.29 cents in 2011 and the highest cost per pound in the past 10 years. It compared to 19.21 cents in 2010; 19.66 cents in 2009; 20.99 cents in 2008; 20.03 cents in 2007; 19.88 cents in 2006; and 19.14 cents in 2005. The average all cheese yield decreased to 12.17 pounds per cwt. of milk in 2012, compared to 12.21 pounds in 2011; 13.7 pounds in 2010; 13.28 pounds in 2009; 13.58 pounds in 2008; 13.71 pounds in 2007; and 12.24 pounds in 2006.

The 2012 average cost of manufacturing butter was 16.88 cents per pound, down from 17.75 in 2011 and the lowest since 2008. Among seven plants, 2012 costs ranged from 16.01cents per pound for the low-cost group to 17.82 cents for the high-cost group.

The cost to produce nonfat dry milk was 19.99 cents per pound, up from 19.42 cents in 2011. Among nine plants, the 2012 range was 17.82 cents per pound for the low-cost group; 21.16 cents for the medium-cost group; and 25.38 cents for the high-cost group (three plants in each group).The full report is available at:

Indiana producers see green

Indiana dairy producers may be “taking the train” to expand their market outreach. A yet to be launched nonstop rail service called the “Green Express,” operated by the CSX Rail Co., will link Tampa, Fla., to LaPorte, Ind., and bring fresh fruits and vegetables from the Southeast and the Caribbean to Chicago, the second largest market area in the U.S. The train may also bring some “green” to Indiana dairy producers.

The Indiana Dairy Producers Organization (IDP) recently heard details from the Green Express’ Chris McGrath and IDP’s Dave Forgey said they’ve been looking at this since 2011 and believe the first run will take place in March.

“Those cars that come up, have to go back,” Forgey said, so IDP is looking for cooperatives or independent processors who will take advantage of this opportunity to reach consumers in the southeastern states, Caribbean, or beyond. He said the improvements made in the Panama Canal could mean product going to China and the Asian markets, South Korea and Japan and possibly compete with Western ports.

Plants exist within a five- or six-hour drive of the LaPorte location, according to Forgey, who sees “tremendous opportunity if we can get them (processors) interested and step out of the norm into some new ideas.”


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